Technology has become a powerful force in daily corporate management, and it has revolutionized corporate strategy. Pascual Montañés, professor of strategic management of the Instituto de Empresa in Madrid, told Universia-Knowledge at Wharton that executives must deal with a significant change when it comes to understanding and defining their company’s goals. “A manager is nothing more than s omeone who seduces stakeholders,” he says. In other words, his or her job is to win over everyone who participates in the corporate activities — the company’s shareholders, customers, suppliers and administrators as well as the communications media.
One of the most profound changes that companies have experienced around the world is the growing importance of their stakeholders. Montañés makes that clear in his new book, Corporate Governance Intelligence, co-authored with Eduardo Olier, who is independent consultant, president of Cogno Data Consulting and a corporate advisor to Bearing Point in Spain.
According to Montañés, “The map of corporate stakeholders is changing.” Shareholders are no longer the center of attention. That spot is now occupied by corporate customers and other participants in the company. Until recently, he says, managers only had to think about creating value for shareholders. Now, they have to pay attention to many more players and pursue strategies that have a broader impact on the entire society. This is exactly where technology plays an essential role because it makes information flow more rapidly, Montañés suggests.
Mapping Corporate Stakeholders
The relative importance of various stakeholders differs according to the unique characteristics of each corporation. Montañés notes, for example, that such companies as Mercadona, a Spanish distribution firm, make customers their number-one priority. Moving down their ladder of priorities, these companies also take into account employees, suppliers, society (government and mass media) and shareholders.
Until recently, the literature about management focused on managers’ efforts to create value for their shareholders. These days, however, the corporate human resources department is playing an increasingly important role, as are customer service and marketing, according to Montañés. Companies are also increasingly concerned about the image they project because the media have become the central window through which everyone views companies. “Managers have to take a look at a map of their stakeholders and establish some priorities” because customers no longer take a back seat. However, “no two companies are alike,” says Montañés, and each company has its own unique map of stakeholders.
Montañés adds that an important change is also taking place in s takeholders’ expectations. Customers are not only looking for the right price but also for high quality. When a company achieves a balance of those two variables, consumers wind up getting both superior service and greater transparency. Consumers “are looking for higher quality in the way they are treated,” he says. For their part, suppliers want to be treated like strategic partners.
As for shareholders, they care about the value of their shares but they also care about the reputation of any company they invest in. The government wants companies to actively participate in job creation initiatives, and it wants companies to be ready for closer cooperation with the administration, notes Montañés, adding that until recently, companies that actively concerned themselves with managing the environment were considered a novelty. The latest trend is for companies to focus on human factors, such as setting up programs that improve labor relations, and establishing initiatives that provide the same promotion opportunities for both male and female employees.
Applying Technology to Management
The proper way for managers to meet their obligations is to apply advanced technology to corporate strategy. “Technology makes it easier to deal with the complexities of management” by making it possible to have more access to information, says Montañés. Technology also builds bridges that make it easier to exchange information between a company’s stakeholders and its managers. “Managers have to look at how their stakeholders line up, and search for a better way to manage, so that they can take care of the needs and expectations of every stakeholder,” he adds.
When it comes to information, economic and social stakeholders are not only looking for specific kinds of data; they also expect an open line of communication between themselves and the company, and a flow of communication that moves in both directions. According to Montañés, when it is time to create a strategic plan, you also have to take advanced technology into account. Managers need to understand how the new systems can help them achieve their goals, and they need to be able to calculate how much they need to spend in order to do that.
“By its very nature, managing is a political activity because managers have to comply with a range of different obligations to various stakeholders,” notes Montañés. “Technology makes it easier to manage this complexity because it enables managers to forge relationships with various stakeholders.” Nevertheless, there is a vicious circle. Companies would not invest in new technology if the technology made work more complicated for managers. Managers have to create more and more value for an ever larger number of social and economic participants.
“Managers have to orchestrate the interests of different stakeholders. The various interests are not necessarily opposed to one another but you need a great deal of creativity to get them aligned,” Montañés suggests. For this new strategic model to succeed, the technology sector must work together with companies “to achieve the paradigm of corporate governance intelligence.” It’s necessary to create a symbiosis between the goals of companies and the benefits provided by technology.
“The manager’s vision consists in knowing who gives orders and who does not. This is precisely where companies fail,” notes Montañés. “You have to be ambitious and create value for the largest number of stakeholders.” Every company must grapple with the following question: How many stakeholders can we satisfy? “Some short sighted managers see only a portion of the total reality,” Montañés says. Quite a few managers still fail to pay sufficient attention to their departments that are responsible for investor relations and communications. Montañés say that you need to attend to these needs just as companies have learned to pay attention to human relations, which is now an ordinary department in most companies. “Managers have to be realists,” he states. “They must recognize the various stakeholders who exist within the company, and they must organize themselves so they can s atisfy all of those stakeholders.”
According to Montañés, companies make two major mistakes when it comes to adopting new corporate strategy. On the one hand, they fail to recognize the importance of one of their stakeholders. On the other hand, they fail to realize that the interests of various groups have radically changed in recent years. In his opinion, the change began on December 2, 2001 , when the Enron s candal erupted. The Enron case made it obvious that “it is a reductionist approach to think that the only goal of a company should be to create value for its shareholders, and disregard conditions in the overall company.” Society, Montañés adds, has also changed the way it looks at corporations. In the old days, some companies known as “national champions” had a very significant presence in their sector. That trend gave way to talk about the latest mergers and takeovers launched [across borders] in Europe. Until recently, “generating money was not something that was well thought of,” he notes.
The Generation that Played Nintendo
Such attitudes have changed, according to Montañés. Stakeholders have learned that “wherever there is no wealth, there is nothing.” Many governments now “pamper their companies” with assistance and subsidies. This positive view of the corporation creates ideal conditions that managers can use to their advantage. They can “meet their obligations with help from technology,” says Montañés. To do that, however, managers have to supply stakeholders in the company with lots of information that is clear and transparent, whether through direct means or via the communications media.
Companies also need to use technology platforms to collect information that helps them figure out what their employees and other citizens think about their behavior, Montañés contends. That way, they can behave conscientiously. Although many companies have set up functioning web portals for their employees, those sites have had only limited utility. That’s because many employees lack a culture of technology: they are not used to providing their opinions on the web or to taking advantages of the overall benefits of belonging to an online community, he says.
“Developing a culture of technology is something you need to do on both the personal and organization level,” notes Montañés. Although technology is here to stay, Montañés recognizes that the latest technologies are not easily applied in the business world. He believes that it will be another decade “until the generation that played with Nintendo achieves managerial positions.” They will adapt the latest technological advances to the business world. For them, Information and Communications Technology (ICT) play a role not only in the workplace but also in their daily lives.